Lotte chief gets suspended prison sentence; free to run firm

SEOUL (Reuters) - A Seoul court on Friday found Lotte Group Chairman Shin Dong-bin guilty of breach of trust and embezzlement and sentenced him to 20 months in prison, suspended for two years, leaving him free to try and revive the conglomerate after steep losses in China.

The Seoul Central District Court cleared the executive of some counts of breach of trust and one embezzlement charge.

“I apologize to the public,” Shin said as he left court, without commenting further.

Prosecutors had sought a ten-year jail term for Shin on charges of embezzlement and breach of trust after a probe since 2016 into the retail-to-chemicals group.

The ruling will come as a relief to Lotte at the end of a tough year during which it became the highest-profile corporate victim of a Beijing-Seoul spat over South Korea’s installation of a U.S. missile defense system.

South Korea’s fifth-largest conglomerate said, “We respect the court’s decision. Lotte Group executives and employees will further unite to contribute to economic progress and do our best to meet our social responsibility.”

The prosecution did not have an immediate comment. Legal experts said the prosecution was likely to appeal.

Shin is the subject of another ongoing trial related to a bribery scandal involving former President Park Geun-hye. Prosecutors are seeking a four-year jail term and a fine of 7 billion won ($6.49 million).

In the meantime, Friday’s ruling means Lotte, with 110.8 trillion won worth of assets, avoids a leadership vacuum for the time being as it navigates mounting China losses and an uncertain recovery.

Shunned in China, its key market, after it was pressed by Seoul to provide land for the THAAD missile defense system, Lotte’s third-quarter China hypermarket sales were nearly wiped out to about $278,000 from around $264 million a year earlier.

Nearly all Lotte Mart stores in China have been shut for much of the year with local authorities citing fire safety issues, and the group has now put the business up for sale.

But the sale is likely to be delayed past the end-2017 deadline Lotte had sought, Lotte Corp official Choi Min-ho said, without giving a reason.

BATTENING DOWN THE HATCHES

Lotte’s businesses in South Korea, including its major duty-free operations, that had counted on big-spending Chinese tourists, remain under pressure amid curbs on Chinese tour groups traveling to the country.

South Korea’s credit rating agencies have downgraded or cut their outlook for corporate bonds of the group’s flagship retailer Lotte Shopping and Hotel Lotte [HTLOT.UL], citing hurdles in improving their financial stability.

Lotte, which shelved plans for an estimated $4.5 billion IPO of Hotel Lotte amid the investigation, is now battening down the hatches as a difficult year draws to an end.

Lotte Shopping has frozen wages for its department store business this year for the first time since 2009, three Lotte officials said this week, declining to be identified as the matter was sensitive.

While Lotte confirmed wages had been frozen, the retail-to-chemical conglomerate declined further comment.

However, one of the officials from the department store business said: “Wages have been frozen due to various factors, but the THAAD issue was one of them.”